‘Cliff’ talks at stalemate as Obama makes public appeal

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President Obama spoke about the economy at a Rodon Group toy factory in Hatfield, Pa., where he lobbied Americans on his proposals.

By Lori Montgomery
Washington Post
December 01, 2012

HATFIELD, Pa. — House Speaker John A. Boehner declared Friday that talks to avert the year-end austerity crisis have reached a ‘‘stalemate,’’ as President Obama insisted that tax rates on the wealthy must rise as part of a deal with Congress.

The president traveled to a toy factory here to follow up his pledge to lobby the American people for his proposals, which include an immediate freeze on tax rates for most Americans while allowing tax cuts benefiting the wealthy to expire.

The Republican plan to raise tax revenue by capping deductions is not enough, Obama said, hardening his stance that no agreement will be reached unless it includes a tax increase for those making more than $250,000 a year.

Obama, who outraged Republicans on Thursday with his opening bid in the negotiations over what has been dubbed the “fiscal cliff,” insisted that the wealthy pay higher tax rates as part of any compromise, White House officials say. Republicans have said they would be open to raising tax revenue from the wealthy by limiting deductions, but have been firm that they will reject tax-rate increases.

Without any action, tax rates on nearly all Americans will rise at the end of the year and severe spending cuts will kick in. The tax hikes comprise most of the fiscal cliff, and economists say they will likely push the country into recession.

Obama gave his speech at the Rodon Group in Pennsylvania, a manufacturing firm that makes toys based on Nintendo and Angry Birds products, among others. The firm employs more than 150 people and has brought back production from China over the past few years.

The president’s insistence on higher tax rates is part of a plan given to Republicans Thursday that calls for $1.6 trillion in new taxes over 10 years, $50 billion in fresh spending on the economy, and an effective end to Congressional control over the size of the national debt. The proposal, delivered to the Capitol by Treasury Secretary Timothy Geithner, mirrors previous White House deficit reduction plans and satisfies Democrats’ demands that negotiations begin on terms dictated by the president.

But the offer lacked any concessions to Republicans, most notably on the core issue of where to set tax rates for the most affluent Americans. House Speaker John Boehner, Republican of Ohio, quickly rejected the proposal on Thursday, and GOP aides expressed frustration with the White House’s approach.

Republicans have been arguing that the country could raise as much revenue from limiting deductions as through raising tax rates, which they say would hurt the economy.

The White House points to independent research showing that raising rates on the wealthy would have relatively little impact on the economy and says it is impossible to raise enough tax revenue by limiting deductions to stabilize the nation’s borrowing — and to do it without compromising the charitable deduction and other deductions. Obama has opened the door to trimming the higher tax rates on the wealthy from what they would be if no deal were made — when the top tax brackets will go from 33 percent to 35 percent and 35 percent to 39.6 percent. Taxpayers would pay this higher rate on income earned over $200,000 for an individual, or $250,000 for a household.

The White House’s hard line seems to be taking Republicans by surprise. After meeting with Geithner for about 45 minutes Thursday morning, Boehner announced his frustration with a negotiation process in which nearly three weeks have lapsed since the election with ‘‘no substantive progress.’’

‘‘I’m disappointed in where we are, and disappointed in what’s happened over the last couple weeks,’’ Boehner told reporters. ‘‘Going over the fiscal cliff is serious business. And I’m here seriously trying to resolve it. And I would hope the White House would get serious as well.’’

Democratic leaders, meanwhile, were triumphant after receiving similar briefings from Geithner and White House legislative liaison Rob Nabors. Top Democrats have insisted for months that an Obama victory would entitle them to demand far more in new taxes than Republicans have been willing to consider, to seek new measures to boost economic growth, and to avoid major cuts to entitlement programs such as Social Security and Medicare.

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